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Item 1A. Risk Factors

2023-02-22 compared with 2022-02-23 · 146 added, 171 removed, 251 unchanged (56% of the section changed)

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Strategic Risks Related to Our Business

Our business will suffer if we are not successful in developing and expanding our owned and partner brands across our brand blueprint.

Our strategy is to focus on fewer, larger global brands with an emphasis on developing and expanding those of our owned and key partner brands, which we view as having the largest global potential, across our brand blueprint.

As we concentrate our efforts on a more select group of brands, we believe we can gain additional leverage and enhance the consumer experience.

This focus means that our success depends disproportionately on our and our partners’ ability to successfully develop this select group of brands across our brand blueprint and to maintain and extend the reach and relevance of these brands to global consumers in a wide array of markets.

This strategy has required us to acquire, build, invest in and develop our competencies in storytelling, digital gaming, consumer products and entertainment.

Acquiring, developing, investing in and growing these competencies has required significant effort, time and money, with no assurance of success.

The success of our brand blueprint strategy also requires significant alignment and integration among our business segments.

If we are unable to successfully develop, maintain and expand our owned and key partner brands across our brand blueprint, our business performance will suffer.

If we or our partners fail to successfully develop and deliver engaging storytelling through entertainment media our ability to build our brands and sell products will suffer.

Engaging storytelling offered through entertainment media, such as television, films, digital content and other media, is an important way for consumers to experience our and our partners’ brands.

The success, or lack of success, of such entertainment media efforts can significantly impact the demand for our products and our financial performance.

We spend considerable resources in designing and developing products in conjunction with our and our partners’ planned media releases.

We also rely heavily on the efforts of third parties, such as licensors, film studios, content producers and distribution channels with whom we work, with respect to the development of content and timing of media development, release dates and the ultimate consumer interest in and success of these media efforts.

In some cases, we do not fully control when or if any particular project will be greenlit, developed or released.

Our licensors, media partners or other third parties may change their plans with respect to projects and release dates or may decide to cancel development.

Lack of control can make it difficult for us to get entertainment projects developed, plan future entertainment slates and to successfully develop and market products in conjunction with such entertainment projects, given the lengthy lead times involved in product development and successful marketing efforts.

Any delay or cancellation of planned product development work, releases, or media support may decrease the number of products we sell, which may harm our business.

In 2020 and continuing into parts of 2021, productions and entertainment releases were delayed due to the shutdown of productions and theaters during the COVID-19 pandemic.

Delays and shutdowns such as those we have experienced, can have and had an adverse effect on our results.

If films, television shows, or any other key entertainment content for which we develop and market products are not as successful as we and our partners anticipate, our revenues and earnings will decline.

Consumer interests change rapidly and acceptance of products and entertainment offerings are influenced by outside factors, making it difficult to create storytelling experiences and to design and develop products, play patterns and entertainment offerings which are and will continue to be popular with children, families and audiences.

The interests of children, families, fans and audiences evolve extremely quickly and can change dramatically from year to year and by geography.

To be successful, we must correctly anticipate the types of entertainment, products and play patterns which will capture consumers’ interests and imagination, and quickly develop and introduce innovative products and engaging entertainment which can compete successfully for consumers’ limited time, attention and spending.

This challenge is more difficult with the ever-increasing utilization of technology, social media and digital media in entertainment offerings, and the increasing breadth of entertainment available to consumers.

Our business will suffer if we are not successful in executing our Blueprint 2.0 strategy and transformation initiatives.

Our Blueprint 2.0 strategy focuses on fewer and bigger brands that we believe have the largest potential, while emphasizing bottom-line growth, operational discipline, enhanced focus on our fans and commitment to shareholder return.

To support our strategy, in mid-2022, we formed the Hasbro Transformation Office ("HTO"), a team of leaders dedicated to designing and running a simple, efficient and effective business aligned with our Blueprint 2.0 strategy.

The HTO is supporting our Operational Excellence Program to deliver $250-$300 million in annual run-rate cost savings by year-end 2025.

There are no assurances that we will achieve these cost savings.

Failure to execute our strategic plan and transformation initiatives may harm our business.

Our ability to successfully implement and execute these plans and initiatives in a timely basis, if at all, is dependent on many factors, including, among other things:

• our ability to successfully innovate, design, develop, price, commercialize and grow a select group of brands across our Blueprint 2.0 to global consumers in a wide array of markets;

• our ability to successfully grow our digital gaming and direct-to-consumer businesses;

• our ability to obtain and analyze data and insights from consumers to enable us to make informed decisions about priorities and consumer preferences;

• our ability to gain market share in focus categories:

Action Figures & Accessories;

Arts & Crafts;

Outdoor & Sports;

Preschool Toys;

• our ability to simplify our supply chain logistics and manage inventory;

• the ability of our workforce to focus and execute on priority transformational projects across the business;

• the attraction and retention of key personnel with core skills and competencies in the areas of focus, including in tabletop and digital gaming, consumer products and entertainment focused on Hasbro IP;

• our ability to successfully license, divest, sell, or otherwise cease certain parts of the business that are not as profitable as other areas or are not core to the business, such as certain film and television assets of eOne;

• the other risks identified in this report.

Consumer interests change rapidly and acceptance of products and entertainment offerings are influenced by outside factors, making it difficult to design and develop products, play patterns and entertainment offerings which are and will continue to be popular with children, families and audiences.

The interests of children, families, fans and audiences evolve quickly and can change dramatically from year to year and by geography.

To be successful, we must correctly anticipate the types of products (including toys, games, collectibles and technologically advanced and digital games), play patterns and entertainment which will capture consumers’ interests and imagination, and quickly develop and introduce innovative products and engaging entertainment which can compete successfully for consumers’ limited time, attention and spending.

Although we utilize our brand insights platform to gather data and analytics to help us make informed decisions, it is very difficult to predict consumer acceptance with certainty due to, among other things, the ever-increasing utilization of technology at younger and younger ages, social media and digital media in entertainment offerings, and the

increasing breadth of entertainment available to consumers.

Evolving consumer tastes and shifting interests, coupled with an ever-changing and expanding pipeline of entertainment and consumer properties and products which compete for consumer interest and acceptance, create an environment in which some products and entertainment offerings can fail to achieve consumer acceptance, and other products and entertainment offerings can be popular during a certain period of time but then be rapidly replaced.

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There can be no assurance that television programs and films we produce or distribute will obtain favorable reviews or ratings, that films we produce or distribute will be popular with consumers and perform well at the box office or in other distribution channels, or that broadcasters will license the rights to broadcast any of our television programs in development or renew licenses to broadcast programs in our library.

If we devote time and resources to developing and marketing products or entertainment that consumers do not accept or do not find interesting enough to buy in sufficient quantities to be profitable to us, our revenues and profits may decline and our business performance may be harmed.

If we devote time and resources to developing and marketing products or entertainment that consumers do not accept, do not find interesting enough to buy in sufficient quantities to be profitable to us or do not purchase due to the pricing of a product, our revenues and profits may decline and our business performance may be harmed.

Similarly, if our product offerings and entertainment fail to correctly anticipate consumer interests, our revenues and earnings will be reduced.

The challenge of continuously developing and offering products and storytelling experiences that are sought after by children is compounded by the sophistication of today’s children and the increasing array of technology and entertainment offerings available to them.

Children are increasingly utilizing electronic devices, such as computers, tablets and mobile phones, and they are expanding their interests to a wider array of innovative, technology-driven entertainment products and digital and social media offerings at younger and younger ages.

Our products and digital games business compete with the offerings of consumer electronics companies, gaming, digital media and social media companies.

To meet this challenge we, and our competitors, are investing in, designing and marketing products and digital games which incorporate more technology, seek to integrate digital and analog play, and aim to capitalize on new play patterns and increased consumption of digital and social media.

There can be no assurance our brands, products and digital games will successfully compete with other offerings or will achieve or sustain popularity.

Our business will suffer if we are unable to grow our Wizards of the Coast and digital gaming business.

A key component to the success of our brand blueprint strategy is to continue to invest in digital gaming and technology, particularly through our Wizards of the Coast and digital gaming business.

Our business will suffer if we are unable to develop digital and technologically advanced and innovative products.

A key component to the success of our Blueprint 2.0 strategy is to continue to innovate, develop and invest in digital gaming and technologically advanced and innovative products, particularly through our Wizards of the Coast and digital gaming business.

We have invested substantially in this business segment and as a result it has seen significant growth over the past several years, and while primarily through growth in tabletop play, continued digital game development is a key growth factor for the future.

If we are unable to continue to grow this business and ensure its integration with our other business segments, our business may be harmed.

The digital gaming industry is highly competitive and costs associated with designing, developing and producing digital games and technologically advanced or sophisticated toy products tend to be higher than for many of our other more traditional products, such as board and trading card games and action figures, with no assurance of success.

The ability to sell enough of these advanced products, at prices high enough to recoup our costs and make a profit, is constrained by heavy competition in consumer electronics and entertainment offerings and can be further constrained by difficult economic conditions.

The digital gaming industry is highly competitive, including for talent, and costs associated with designing, developing and producing digital games and technologically advanced or sophisticated products tend to be higher than for many of our other more traditional products, such as board and trading card games and action figures, with no assurance of success.

As a result, we face increased risk of not achieving sales sufficient to recover our costs and we may lose money on the development and sale of these products.

Additionally, designing, developing and producing digital and technologically advanced or sophisticated products often relies on third parties and requires different competencies and follows different timelines than traditional toys and games.

Delays in the design, development or production of these digital gaming products could have a significant impact on our ability to successfully offer such products.

In addition, the pace of

change in product offerings and consumer tastes in the electronics and digital gaming areas is potentially even greater than for our other products.

Additionally, designing, developing and producing digital and technologically advanced or innovative products often relies on third parties and requires different competencies and follows different timelines than traditional toys and games.

Delays in the design, development or production of our products could have a significant impact on our success.

In addition, the pace of change in product offerings and consumer tastes in the electronics and digital gaming areas is potentially even greater than for our other products.

If a digital game fails to gain consumer acceptance early in its life cycle, there are limited opportunities to gain such acceptance through secondary launches or distribution through alternative platforms.

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If we fail to respond to or capitalize on the rapid technological development in the entertainment industry, including changes in entertainment delivery formats, our business could be harmed.

The entertainment industry continues to experience frequent change driven by technological development, including developments with respect to the formats through which films, television programming, and other episodic content are delivered to consumers.

The entertainment industry continues to experience frequent change driven by technological development and audience viewing preferences, including developments with respect to the formats through which films, television programming, and other episodic content are delivered to consumers.

With rapid technological changes and dramatically expanded digital content offerings, the scale and scope of these changes have accelerated in recent years.

For example, consumers are increasingly accessing television, film and other episodic content on streaming and digital content networks, such as Netflix, Amazon Prime Video, Hulu, Disney+ and Apple TV+ to name a few.

Similarly, as a result of the COVID-19 pandemic, some entertainment offerings have gone direct to streaming channels as opposed to theaters or at the same time as theaters or have gone to streaming channels after only a short period of time in the theaters.

Direct release to streaming channels is likely to continue.

For example, consumers are continuing to increase their access to television, film and other episodic content on streaming and digital content networks, such as Netflix, Amazon Prime Video, Hulu, Disney+, Apple TV+ and Paramount + to name a few.

Similarly, as a result of the COVID-19 pandemic, some film releases continue to go direct to streaming channels as opposed to theaters or at the same time as theaters or have gone to streaming channels after only a short period of time in the theaters.

Technological as well as other changes caused by the pandemic have caused significant disruption to the retail distribution of entertainment offerings and have caused, and could in the future cause, a negative impact on sales of our products and other forms of monetization of content, especially those which are reliant on box office success.

We may lose opportunities to capitalize on changing market dynamics, technological innovations or consumer tastes if we do not adapt our content offerings or distribution capabilities in a timely manner.

The overall effect that technological development and new digital distribution platforms have on the revenue and profits we derive from our entertainment content, including from merchandise sales derived from such content, and the additional costs associated with changing markets, media platforms and technologies, is unpredictable.

The overall effect that technological development and new digital

distribution platforms have on the revenue and profits we derive from our entertainment content, including from merchandise sales derived from such content, and the additional costs associated with changing markets, media platforms and technologies, is unpredictable.

If we fail to accurately assess and effectively respond to changes in technology and consumer behavior in the entertainment industry, our business may be harmed.

We may not realize the full benefit of our licenses if the licensed material has less market appeal than expected or if revenue from the licensed products is not sufficient to earn out the minimum guaranteed royalties.

The success of entertainment properties for which we have a license, such as licenses we have with The Walt Disney Company, and the ability of us to successfully market and sell related products, can significantly affect our revenues and profitability.

If we produce a line of products based on a movie or television series, the success of the movie or series has a critical impact on the level of consumer interest in the associated products we are offering.

In addition, competition in our industry for access to entertainment properties can lessen our ability to secure, maintain, and renew popular licenses to entertainment products on beneficial terms, if at all, and to attract and retain the talented employees necessary to design, develop and market successful products based on these properties.

The license agreements we enter to obtain these rights usually require us to pay minimum royalty guarantees that may be substantial, and in some cases may be greater than what we are ultimately able to recoup from actual sales, which could result in write-offs of significant amounts which, in turn, would harm our results of operations.

Acquiring or renewing licenses may require the payment of minimum guaranteed royalties that we consider to be too high to be profitable, which may result in losing licenses that we currently hold when they become available for renewal, or not pursuing certain new licenses.

Additionally, as a licensee of entertainment-based properties, we cannot guarantee that a particular property or brand will translate into successful toy, game or other family entertainment products, and underperformance of any such products may result in reduced revenues and operating profit for us.

The play and entertainment industry is highly competitive and the barriers to entry are low.

The industries in which we compete are highly competitive.

If we are unable to compete effectively with existing or new competitors, our revenues, market share and profitability could decline.

The play and entertainment industry is highly competitive.

The play and entertainment industries are highly competitive.

We compete in the U.S.

and internationally with a wide array of large and small manufacturers, marketers, and sellers of analog toys and games, products which combine analog and digital play, digital gaming products, and other entertainment and consumer products, as well as with retailers who offer such products under their own private labels often at lower prices.

In addition, we compete with companies who are focused on building their brands across multiple product and consumer categories, including through entertainment offerings.

Across our business, we face competitors who are constantly monitoring and

attempting to anticipate consumer tastes and trends, seeking ideas which will appeal to consumers, and introducing new products that compete with our products for consumer acceptance and purchase.

and internationally with a wide array of large and small manufacturers, marketers, and sellers of toys and games, products which combine traditional and digital play, digital gaming products, and other entertainment and consumer products, as well as with retailers who offer such products under their own private labels often at lower prices.

In addition, we compete with companies focused on building their brands across multiple product and consumer categories, including through entertainment offerings.

Across our business, we face competitors who are constantly monitoring and attempting to anticipate consumer tastes and trends, seeking ideas which will appeal to consumers, and introducing new products that compete with our products for consumer acceptance and purchase.

In addition to existing competitors, the barriers to entry for new participants in the play and entertainment industry are low, and the increasing importance of digital media and the heightened connection between digital media and consumer interest, has further increased the ability for new participants to enter our markets, and has broadened the array of companies we compete with.

New participants with a popular product idea or entertainment property can gain access to consumers and become a significant source of competition for our products in a very short period of time.

These existing and new competitors may be able to respond more rapidly than us to changes in consumer preferences.

These existing and new competitors may be able to respond more rapidly than us to changes in consumer preferences or may design products that are more desirable than ours.

Our competitors’ products may achieve greater market acceptance than our products and potentially reduce demand for our products, lower our revenues and lower our profitability.

Our entertainment business faces competition from major film studios and television production companies as well as other independent distributors and independent content producers.

The success of our brand blueprint strategy is dependent in part on our ability to produce and distribute entertainment offerings that consumers want to experience and that create further awareness of our brands and products.

Our global independent studios, operated by eOne, compete with major U.S.

and international studios, that typically release a large number of films annually and command a significant share of box office revenues, streaming revenues, and television airtime, as well as other independent film and television production or distribution companies.

Many of the major U.S.

studios are part of large, diversified corporate groups with a variety of other operations, including television networks, cable channels and streaming services that can provide both in‑house distribution capability and varied sources of earnings that may allow them to better offset fluctuations in the financial performance of their film and television operations.

Our entertainment business faces global competition from major film studios and television production companies as well as other independent distributors and independent content producers.

Many of these competitors release a large number of films annually and command a significant share of box office revenues, streaming revenues, and television airtime, as well as other independent film and television production or distribution companies.

Some of these competitors have substantially greater marketing and financial resources than we do and may be able to compete aggressively on pricing in order to increase box office or streaming revenues, obtain distribution rights and obtain television airtime.

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The competition we face may cause us to lose market share, achieve lower prices for our productions or pay more for third‑party content, any of which could harm our business.

We may not realize the anticipated benefits of acquisitions or investments in joint ventures, or those benefits may be delayed or reduced in their realization.

Acquisitions and investments have been a component of our growth and the development of our business, such as our acquisition of our global independent studio, eOne.

Acquisitions can broaden and diversify our brand holdings and product offerings, and allow us to build additional capabilities and competencies around our brand blueprint, such as entertainment and digital gaming offerings.

In some cases, we may only obtain an exclusive license for certain aspects of an IP or for certain territories, which means that some of our competitors also have the right to use the same IP for other categories or in different territories.

The license agreements we enter to obtain these rights usually require us to pay minimum royalty guarantees that may be substantial, and in some cases may be greater than what we are ultimately able to recoup from actual sales, which could result in write-offs which, in turn, would harm our results of operations.

We may not realize the anticipated benefits of acquisitions, dispositions or investments in joint ventures, or those benefits may be delayed or reduced in their realization.

We cannot be certain that the products and offerings of companies we may acquire, or acquire an interest in, will achieve or maintain popularity with consumers in the future or that any such acquired companies or investments will allow us to more effectively market our products, develop our competencies or grow our business.

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However, we cannot be certain that these synergies, efficiencies and cost savings will be realized.

Even if achieved, these benefits may be delayed or reduced in their realization.

Even if achieved, these benefits may be delayed, reduced or short-lived in their realization.

In other cases, we may acquire or invest in companies that we believe have strong and creative management, in which case we may plan to operate them more autonomously rather than fully integrating them into our operations.

We cannot be certain that the key talented individuals at these companies would continue to work for us after the acquisition or that they would develop popular and profitable products, entertainment or services in the future.

We cannot guarantee that any acquisition or investment we may make will be successful or beneficial, and acquisitions can consume significant amounts of management attention and other resources, which may negatively impact other aspects of our business.

Acquisitions of businesses and brands could also be adversely affected by changes in our business strategy.

With our Blueprint 2.0 strategy, we may seek to sell, license or otherwise dispose of certain non-core assets, such as certain film and television assets.

We may not achieve a successful sale, license or disposition of non-core assets.

Additionally, we cannot guarantee that any acquisition, disposition or investment we may make will be successful or beneficial, and acquisitions, dispositions and investments can consume significant amounts of management attention and other resources, which may negatively impact other aspects of our business.

Operational Risks Related to our Business

If we are not successful in transforming our supply chain operations, our business may be harmed.

As part of our transformation efforts, we are in the process of optimizing our supply chain by improving our systems and sourcing to enable efficient product deployment, enhance product quality and safety, drive efficiency in transportation and our fulfilment centers, and strengthen our direct-to-consumer operations.

This is a long-term project, with no assurance that we will achieve the anticipated efficiencies and benefits from such efforts.

If the transformation of our supply chain operations is not successful, our business may be harmed.

Further we may not achieve our anticipated cost savings, and we may face costly inefficiencies or other supply chain disruptions.

An inability to develop, introduce and ship planned products, product lines and new brands in a timely and cost-effective manner may damage our business.

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This risk is heightened by our customers’ compressed shipping schedules and the seasonality of our business.

The risk is also exacerbated by the increasing sophistication of many of the products we are designing, and brands we are developing in terms of combining digital and analog technologies, and providing greater innovation and product differentiation.

Unforeseen delays or difficulties in the development process, significant increases in the planned cost of development, or changes in anticipated consumer demand for our products and new brands may cause the introduction date for products to be later than anticipated, may reduce or eliminate the profitability of such products or, in some situations, may cause a product or new brand introduction to be discontinued.

The risk is also exacerbated by the increasing sophistication of many of the brands and products we are designing and developing in terms of combining digital and traditional technologies, and providing greater innovation and product differentiation.

Unforeseen delays or difficulties in the development process, significant increases in the planned cost of development, or changes in anticipated consumer demand for our products and new brands may cause the introduction date for products to be later than anticipated, may reduce or eliminate the profitability of such products, result in excess inventory, or, in some situations, may cause a product or new brand introduction to be discontinued.

If we are unable to navigate through global supply chain challenges, our business may be harmed.

In 2021 and continuing into 2022, we have faced global supply chain challenges with the production and delivery of some products being delayed due to logistics, including labor, trucking and container shortages, port congestion and other shipping disruptions.

We have experienced increases in material costs and shortages for some of our products, due in part to higher wages being paid due to labor shortages in China and Vietnam, as well as periodic and unpredictable manufacturing shut-downs due to COVID-19.

While we have taken actions to lessen the impact of these supply chain challenges, such as through the use of alternative ports and air freight, such actions have resulted in higher costs and there can be no assurance that the actions taken will continue to be effective.

During the past couple of years, we have faced global supply chain challenges with the production and delivery of some products being delayed due to logistics, including labor, trucking and container shortages, port congestion and other shipping disruptions.

While we have taken actions to lessen the impact of these supply chain challenges, such as through the use of alternative ports and air freight, and accelerating inventory purchases in certain cases to ensure product availability for customers, such actions have resulted in higher costs and there can be no assurance that the actions taken will be effective.

We have also increased prices in some cases to help offset increased costs.

We can provide no assurance that we will be able to increase prices in the future and we cannot assure that price increases we have already taken will offset the entirety of additional costs we have incurred and may incur in the future to mitigate the supply chain disruption.

We can provide no assurance that we will be able to

increase prices in the future and we cannot assure that price increases we have already taken, will offset the entirety of additional costs we have incurred, and may incur in the future to mitigate the supply chain disruption.

Further, if we are unable to negotiate favorable carrier agreements, deliver products on time or otherwise satisfy demand for our products, our business may be harmed.

If we are unable to adapt our business to the continued shift to ecommerce, our business may be harmed.

Our ecommerce business is accounting for a higher portion of the ultimate sales of our products to consumers than it has historically.

In 2021, ecommerce sales represented a significant portion of overall sales to our key customers as consumers increasingly purchased our products online as compared to through in-store shopping due to the continued transition to ecommerce accelerated by the shutdown and limited access to retail stores during the COVID-19 pandemic.

Ecommerce sales have resulted in retailers holding less inventory, which has caused us to adjust our supply chain.

Additionally, if our technology and systems used to support ecommerce order processing are not effective, our ability to deliver products on time on a cost-effective basis may be adversely affected.

If we are unable to adapt our business to the continued shift to ecommerce and direct-to-consumer, our business may be harmed.

Our ecommerce business, including through our direct-to-consumer ecommerce, fan-based platform PULSE, is accounting for a higher portion of the ultimate sales of our products to consumers than it has historically.

In recent years, the increase in ecommerce sales has resulted in retailers holding less inventory, which has caused us to adjust our supply chain.

If our technology and systems used to support ecommerce order processing, including through PULSE, are not effective, our ability to deliver products on time on a cost-effective basis may be adversely affected.

Failure to continue to adapt our systems and supply chain and successfully fulfill ecommerce sales could harm our business.

In 2022, ecommerce sales were adversely affected as more customers increased their willingness to shop in brick and mortar stores.

The concentration of our retail customer base and continued shift to ecommerce sales means that economic difficulties or changes in the purchasing or promotional policies or patterns of our major customers could have a significant impact on us.

We depend upon a relatively small retail customer base to sell the majority of our products.

For the fiscal year ended December 26, 2021, Wal-Mart Stores, Inc., Amazon.com and Target Corporation accounted for approximately 13%, 11% and 8%, respectively, of our consolidated net revenues.

Due to our customer concentration, if one or more of our major customers were to experience difficulties in fulfilling their obligations to us, cease doing business with us, significantly reduce the amount of their purchases from us, favor competitors or new entrants, increase their direct competition with us by expanding their private-label business, change their purchasing patterns, impose unexpected fees on us, alter the manner in which they promote our products or the resources they devote to promoting and selling our products, or return substantial amounts of our products, our business may be harmed.

For the fiscal year ended December 25, 2022, Walmart, Inc.

and Amazon.com, Inc.

accounted for approximately 11% and 10%, respectively, of our consolidated net revenues.

Similarly, sales of certain products of our Wizards business depend in part on the success of specialty hobby stores.

Due to our customer concentration and customer base, if one or more of our major customers or specialty hobby stores were to experience difficulties in fulfilling their obligations to us, cease doing business with us, significantly reduce the amount of their purchases from us, favor competitors or new entrants, increase their direct competition with us by expanding their private-label business, change their purchasing patterns, impose unexpected fees on us, alter the manner in which they promote our products or the resources they devote to promoting and selling our products, or return substantial amounts of our products, our business may be harmed.

Our customers do not make binding long-term commitments to us regarding purchase volumes and make all purchases by delivering purchase orders.

Any customer could reduce its overall purchase of our products and

reduce the number and variety of our products that it carries and the shelf space allotted for our products.

Any customer could reduce its overall purchase of our products and reduce the number and variety of our products that it carries and the shelf space allotted for our products.

In addition, increased concentration among our customers could negatively impact our ability to negotiate higher sales prices for our products and could result in lower gross margins than would otherwise be obtained if there were less consolidation among our customers.

Furthermore, as we experienced with the bankruptcy of Toys“R”Us, the failure or lack of success of a significant retail customer could negatively impact our revenues and profitability.

Furthermore, as we experienced with the bankruptcy of certain of our retailers in the past, the failure or lack of success of a significant retail customer could negatively impact our revenues and profitability.

Our substantial business, sales and manufacturing operations outside the U.S.

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We operate facilities and sell products and entertainment offerings in numerous countries outside the U.S.

Over time, we expect our international sales and operations to continue to grow both in dollars and as a percentage of our overall business as a result of a key business strategy to expand our presence in emerging and underserved international markets, such as Eastern Europe, Latin America, Africa and Asia.

Additionally, we utilize third-party manufacturers primarily located in the Far East, including China, Vietnam and India, to produce most of our products.

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• Potential challenges to our transfer pricing determinations and other aspects of our cross-border transactions, which can materially increase our taxes and other costs of doing business;

• Political instability, civil unrest and economic instability;

• Political instability, civil unrest and economic instability, such as has been experienced between Russia and Ukraine, which has resulted in a suspension of our business activities in Russia;

• Greater difficulty enforcing intellectual property rights and weaker laws protecting such rights;

• Implications or difficulties arising out of the United Kingdom’s exit from the European Union;

• Complications in complying with different laws in varying jurisdictions and in dealing with changes in governmental policies and the evolution of laws and regulations and related enforcement, as such laws and policies relate to our products and approval of entertainment;

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Because of the importance of international sales, sourcing and manufacturing to our business, our financial condition and results of operations could be significantly harmed if any of the risks described above were to occur or if we are otherwise unsuccessful in managing our increasing global business and operating in an environment with these risks.

Our reliance on third-party manufacturers to produce our products, particularly in China, Vietnam and India, presents risks to our business.

All our products are manufactured by third-party manufacturers, the majority of which are in China, with a significant amount of our product sourcing also coming from manufacturers in Vietnam and a lesser amount from India.

Our reliance on third-party manufacturers to produce our products, particularly in China, the U.S., Vietnam and India, presents risks to our business.

Should changes be necessary, our external sources of manufacturing can be shifted, over a significant period of time, to alternative sources of supply.

If we were prevented or delayed in obtaining products or components for a material portion of our product lines due to economic, political, civil, labor or other factors beyond our control, including work stoppages, slowdowns or strikes, natural disasters, adverse health conditions or pandemics, our ability to manufacture would be adversely affected and our operations may be substantially disrupted, potentially for a

significant period of time.

This delay could significantly reduce our revenues and profitability and harm our business while alternative sources of supply are secured.

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That means these new vendors must successfully develop the capability to manufacture our products to the quality and safety standards we require and within the tight timeframe required by our customers.

Newer and less experienced vendors are more susceptible to product quality, logistics and other issues, due in part to their less mature infrastructure or unfamiliarity with our product standards.

Newer and less experienced vendors are more

susceptible to product quality, logistics and other issues, due in part to their less mature infrastructure or unfamiliarity with our product standards.

We require our third-party manufacturers to comply with our Global Business Ethics Principles, which are designed to prevent products manufactured for us from being produced under inhumane or exploitive conditions.

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Any failure of our third-party manufacturers to comply with labor, consumer, product safety or other applicable requirements in manufacturing products for us could result in damage to our reputation, harm sales of our products and potentially create liability for us.

Our dependence on third-party relationships with studios, content producers and distribution channels to develop and distribute entertainment content is critical to our entertainment operations.

We rely on third party relationships with studios, content producers and distribution channels to develop and distribute entertainment content.

For example, eOne relies on third‑party content producers and distribution channels to sell and distribute films and television programs.

Our dependence on third-party relationships with studios, content producers and distribution channels to develop and distribute digital games and entertainment content is critical to our business.

We rely on third party relationships with studios, content producers and distribution channels to develop and distribute certain digital games and entertainment content.

Our financial performance may be adversely affected by our relationships with these studios, content producers and distribution channels.

Some of our content producers are affiliates of major studios that have their own distribution capability in the markets in which we operate, and some of our distribution channels produce their own content or are affiliated with other content producers.

These third-party content producers and distribution channels may decide, or be required by their respective parent companies, to use their intra‑company distribution or content production capabilities rather than contracting with us.

Some of our content producers and digital gaming developers are affiliates of major studios that develop their own content or games.

Some have their own distribution capability in the markets in which we operate, and some may decide, or be required by their respective parent companies, to use their intra‑company distribution or content production capabilities rather than contracting with us.

Our business may be harmed if the studios, content producers and distribution channels with which we work stop or reduce the amount of work they do with us or otherwise demand less favorable terms to us.

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These arrangements are also terminable by the counterparty under certain circumstances.

If we are unable to renew or replace them on

acceptable terms, we may not be able to replace this content with other film acquisitions.

If we are unable to renew or replace them on acceptable terms, we may not be able to replace this content with other film acquisitions.

Even if these contracts are renewed or replaced, the terms on which we acquire content may be less favorable than the terms of our current agreements and the financial success or quantity of films and television programs we acquire through these long-term contracts may decrease.

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We compete with many other potential employers in recruiting, hiring and retaining our management team and our many other skilled officers and employees around the world.

In the entertainment and digital gaming industries, experienced personnel and top creative talent are in high demand and competition for their talent is intense.

The increasing prevalence of remote work creates further challenges in retaining employees as some employees desire more flexibility in their employment and the ability to work remotely opens up more employment opportunities.

The impact of failing to retain key employees can be high due to loss of key knowledge and relationships, loss of creative talent, lost productivity, hiring and training costs, all of which could result in lower profitability.

In the digital gaming and entertainment industries, experienced personnel and top creative talent are in high demand and competition for their talent is intense.

The increasing prevalence of remote and hybrid work creates further challenges in retaining employees as some employees desire more flexibility in their employment and the ability to work remotely or hybrid opens up more employment opportunities.

Additionally, as we continue to transform our business to execute on our Blueprint 2.0 strategy, we have reduced our headcount and may otherwise lose employees due to our decision to eliminate or reduce the amount of work performed relative to non-core aspects our business.

The impact of reductions in force or failing to retain key employees can be high due to increased risk of loss of important information, key knowledge and relationships, loss of creative talent, lost productivity, hiring and training costs, all of which could result in lower profitability or otherwise harm the business.

We cannot guarantee that we will recruit, hire or retain the key personnel we need to succeed.

We have experienced significant changes in our leadership due in part to the untimely passing of our former Chief Executive Officer and Chairman, Brian Goldner in October of 2021, resulting in the recent appointment of Chris Cocks as our new Chief Executive Officer and, Eric Nyman as our new President and Chief Operating Officer, both becoming effective February 25, 2022.

Our future success will depend on the leadership of our key executives such as Mr.

Cocks and Mr.

In addition, we have experienced the retirement and transition of certain other executives, and changes in our employee composition, both in terms of global distribution and in skill sets.

Our loss of key management or other employees, inability to drive success through our new leaders, or our inability to retain or hire talented people with the skill sets we need for our diverse and changing business, could significantly harm our business.

We have experienced significant changes in our leadership in a relatively short period of time.

This includes the appointments of our new Chief Executive Officer, President of Wizards of the Coast and Digital Gaming, Global Supply Chain Officer, Chief Commercial Officer, Chief People Officer and Chief Transformation Officer, as well as the expected change in Chief Financial Officer following the upcoming retirement of Deborah Thomas, our current Chief Financial Officer, and the departure of our President and Chief Operating Officer.

Our future success will depend on the leadership of our key executives and their ability to navigate the organization through our transformation efforts.

Our loss of key management or other key employees, inability to drive success through our new leaders, or our inability to retain or hire talented people with the skill sets we need for our diverse and changing business, could significantly harm our business.

If we fail to develop diverse top talent, we may be unable to compete and our business may be harmed.

To compete successfully, we must continuously develop a diverse group of talented people.

We promote a diverse and inclusive work environment.

To compete successfully, we must continuously develop a diverse group of talented people.

To that end, we have set goals and objectives with respect to hiring and retention of talented, diverse employees, which we believe will foster new ideas and perspectives that will benefit our business.

Competition for diverse talent is intense.

The recent restructuring changes in our business may make it more difficult to attract and retain diverse talent.

We cannot guarantee we will achieve our goals or that our actions will result in expected benefits to our business.

Our entertainment business could be adversely affected by strikes or other union job actions.

Our entertainment business is dependent in part upon highly specialized union members who are essential to the production of films and television programs.

A strike by, or a lockout of, one or more of the unions that provide personnel essential to the production of films or television programs could delay or halt our ongoing production activities.

Such a halt or delay, depending on the length of time, could cause a delay or interruption in our release of new films and television programs, which could harm our entertainment business.

Our business may be harmed if we are unable to protect our critical intellectual property rights.

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We rely extensively on various information technology systems and software applications to manage many aspects of our business, including product development, management of our supply chain, sale and delivery of our products, royalty and financial reporting and various other processes and transactions.

As part of our transformation efforts, we are also upgrading some of our technology and systems.

We are critically dependent on the integrity, security and consistent operations of these systems and related back-up systems.

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We maintain systems and processes designed to protect this data, but notwithstanding such protective measures, there is a risk of intrusion, cyber-attacks or tampering that could compromise the integrity and privacy of this data.

Cyber-attacks are increasing in their frequency, sophistication and intensity, and are becoming increasingly difficult to detect.

Cyber-attacks continue to increase in their frequency, sophistication and intensity, and are becoming increasingly difficult to detect.

They are often carried out by motivated, well-resourced, skilled and persistent actors, including nation states, organized crime groups, “hacktivists” and employees or contractors acting with malicious intent.

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While we obtain assurances from those parties that they have systems and processes in place to protect such data, and where applicable, that they will take steps to assure the protections of such data by third parties, those partners may also be subject to data intrusion or otherwise compromise the protection of such data.

Any compromise of the confidential data of our customers, consumers, suppliers, partners, employees or ourselves, or failure to prevent or mitigate the loss of or damage to this data through breach of our information technology systems or other means could substantially disrupt our operations, harm our customers, consumers, employees and other business partners, damage our reputation, violate applicable laws and regulations, subject us to potentially significant costs and liabilities and result in a loss of business that could be material.

The risk of data loss or breaches is heightened during uncertain economic times, changes in business strategy and reductions in force.

information technology systems or other means could substantially disrupt our operations, harm our customers, consumers, employees and other business partners, damage our reputation, violate applicable laws and regulations, subject us to potentially significant costs and liabilities and result in a loss of business that could be material.

Global and Economic Risks Relating to our Business

The global coronavirus outbreak or other similar outbreaks of communicable infections, diseases, or public health pandemics in the markets in which we and our employees, consumers, customers, partners, licensees, suppliers and manufacturers operate, could substantially harm our business.

The global outbreak of the coronavirus which continues to adversely impact global populations, and any other variants or outbreaks of communicable infections, diseases or other adverse public health conditions in markets in which we, our employees, consumers, customers, partners, licensees, licensors, suppliers and manufacturers operate, could have a significant negative impact on our business, revenues and profitability.

The occurrence of these types of events can result, and in the case of the coronavirus has resulted in, disruptions and damage to our business, caused by a number of factors:

The global outbreak of the coronavirus which continues to adversely impact global populations, and any other variants or outbreaks of communicable infections, diseases or other adverse public health conditions in markets in which we, our employees, consumers, customers, partners, licensees, licensors, suppliers and manufacturers operate, has had and could in the future have a significant negative impact on our business, revenues and profitability.

The occurrence of these types of events can result, and in the case of the coronavirus has resulted in, disruptions and damage to our business, due to, among other things:

• difficulties in shipping and distributing products due to ongoing port capacity, and labor, shipping container and truck transportation shortages, resulting in higher costs for both ocean and air freight and delays in the availability of products, which can result in delayed sales and in some cases result in lost sales;

These and other disruptions are expected to continue in 2022;

• disruptions in supply of products, due to closures or reductions in operations at third-party manufacturing facilities across several geographies including, but not limited to, China, Vietnam, India, the United States and Ireland;

• adverse sales impact due to changes in consumer purchasing behavior and availability of products to consumers, resulting from retail store closures, limited reopening of retail stores and limitations on the capacity of ecommerce channels to supply additional products;

• fluctuations in our performance based on the progress of different countries in controlling the coronavirus and the maturity of e-commerce platforms in those markets;

• limited production of live-action scripted and unscripted entertainment content due to the hard stop and soft reopening of production studios;

• delays or postponements of entertainment productions and releases of entertainment content both internally and by our partners;

• increases in entertainment production costs due to measures required to minimize COVID-19 risks;

• adverse sales impact due to changes in consumer purchasing behavior and availability of products to consumers;

• uncertain inventory availability or difficulty in anticipating demand, which can result in too little or too much supply at a given time;

• interruptions, delays or postponements of entertainment productions and releases;

• challenges of working remotely.

In response to these challenges, we developed and continue to develop and execute plans to mitigate the negative impact of COVID-19 to the business.

Our responses included:

• utilizing our global supply chain and existing inventory to work to meet demand, while managing freight cost increases across all markets, as our manufacturing facilities returned to varying levels of operation;

• mitigating risk in our global supply chain by expanding shipping capacity, activating alternate ports in China and the U.S.

and prioritizing supply based on inventory and customer needs, including utilizing air freight if necessary;

• accelerating our business online and expanding omni-channel to get products to customers and consumers;

• developing innovative ways to enable players to continue to play games remotely;

• continuing to create new entertainment, including post-production work and the development of animation productions remotely;

• implementing preventative measures and health and safety protocols.

We have reopened our offices, providing employees flexibility in their return to the office by working partially in the office and partially remote.

We have taken measures to safely bring additional workers back to the office, including a return to fully remote work when variants emerge which increase infection rates significantly in areas where we do business.

The transition back from fully remote work to partial remote and partial in person may be difficult for some employees.

We are actively soliciting feedback and making modifications to provide our employees with a productive and safe environment, and plan to continue to monitor employee efficiency, satisfaction, and morale as we continue to transition.

There can be no assurance that employees will not have some disruption in their work due to the transition.

Changes in flexible working arrangements could impact employee retention, employees’ productivity and morale, strain our technology resources and introduce operational risks.

Additionally, the risk of cyber-attacks or other privacy or data security incidents may be heightened as a result of our moving increasingly towards a remote working environment, which may be less secure and more susceptible to hacking attacks.

The impact of coronavirus outbreak continues to be fluid and uncertain, and while vaccines are being rolled out, it is still difficult to forecast the final impact it could have on our future operations.

The impact of coronavirus outbreak continues to be fluid and uncertain, and while vaccines have been rolled out, it is still difficult to forecast the final impact it could have on our future operations.

If our business experiences prolonged occurrence of adverse public health conditions due to the coronavirus or other similar outbreaks, we believe our business could be substantially harmed.

Adverse economic conditions in the markets in which we and our employees, consumers, customers, suppliers and manufacturers operate could negatively impact our ability to produce and ship our products, and lower our revenues, margins and profitability.

Inflation and other adverse economic conditions in the markets in which we and our employees, consumers, customers, suppliers and manufacturers operate could negatively impact our ability to produce and ship our products, and lower our revenues, margins and profitability.

Various economic conditions in the markets we, our employees, consumers, customers, suppliers and manufacturers operate, could have a significant negative impact on our revenues, profitability and business.

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shortages or delays in production or shipment of products or raw materials;

delays or reduced purchases from customers and consumers;

delayed or reduced purchases from customers and consumers;

and other factors that cause increases in costs or delay in revenues.

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and other economies are experiencing, can cause significant increases in the costs of other products which are required by consumers, such as gasoline, home heating fuels, or groceries, may reduce household spending on the discretionary products and entertainment we offer.

Weakened economic conditions, lowered employment levels or recessions in any of our major markets may also significantly

reduce consumer purchases of our products and spending on entertainment.

Weakened economic conditions, lowered employment levels or recessions in any of our major markets may also significantly reduce consumer purchases of our products and spending on entertainment.

Economic conditions may also be negatively impacted by terrorist attacks, wars and other conflicts, natural disasters, increases in critical commodity prices or labor costs, or the prospect of such events.

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Our success and profitability not only depend on consumer demand for our products, but also on our ability to produce and sell those products at costs which allow for us to make a profit.

Rising fuel and raw material prices, due to inflation or otherwise, for paperboard and other components such as resin used in plastics or electronic components, increased transportation and shipping costs, and increased labor costs in the markets in which our products are manufactured all may increase the costs we incur to produce and transport our products, which in turn may reduce our margins, reduce our profitability and harm our business.

Changes in U.S., global or regional economic conditions could harm our business and financial performance.

Rising fuel and raw material prices, due to inflation or otherwise, for paperboard and other components such as resin used in plastics or electronic

components, increased transportation and shipping costs, and increased labor costs in the markets in which our products are manufactured all may increase the costs we incur to produce and transport our products, which in turn may reduce our margins, reduce our profitability and harm our business.

Changes in U.S., global or regional economic conditions could impact discretionary consumer spending and harm our business and financial performance.

Our financial performance is impacted by the level of discretionary consumer spending in the markets in which we operate.

Reductions in stimulus payments provided to consumers could impact discretionary spending.

Recessions, credit crises and other economic downturns, or disruptions in credit markets, in the U.S.

Recessions or even fear or anticipation of recessions, inflation, rising interest rates and mortgage rates, credit crises and other economic downturns, or disruptions in credit markets, in the U.S.

and in other markets in which we operate can result in lower levels of economic activity, lower employment levels, less consumer disposable income, and lower consumer confidence.

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This seasonality for our consumer products business has increased over time, as retailers become more and more efficient in their control of inventory levels through quick response or just in time inventory management techniques, including the use of automated inventory replenishment programs.

Further, ecommerce continues to grow significantly and accounts for a higher portion of the ultimate sales of our products to consumers.

Ecommerce retailers tend to hold less inventory and take inventory closer to the time of sale to consumers than traditional retailers.

Further, ecommerce, including through our own PULSE ecommerce platform, continues to grow significantly and accounts for a higher portion of the ultimate sales of our products to consumers.

Third-party ecommerce retailers tend to hold less inventory and take inventory closer to the time of sale to consumers than traditional retailers.

As a result, customers are timing their orders so that they are being filled by suppliers, such as us, closer to the time of purchase by consumers.

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Additionally, the logistics of supplying more product within shorter time periods increases the risk that we will fail to achieve tight and compressed shipping schedules, which also may reduce our sales and harm our financial performance.

These risks have been exacerbated in 2021 and continuing into 2022 due to the global supply chain challenges we have faced due to logistics, including labor, trucking and container shortages, port congestion and other shipping disruptions.

These risks were exacerbated in 2021 and continued into early 2022 due to the global supply chain challenges we faced due to logistics, including labor, trucking and container shortages, port congestion and other shipping disruptions.

To offset the risk of lack of supply, in 2022 we accelerated inventory purchases.

These purchases, however, did not see corresponding increases in sales as consumers were impacted by the economic environment, including lower discretionary consumer income due to higher inflation and rising interest rates.

The ability to accurately predict levels of inventory remains challenging in the current economic environment.

Our entertainment business is also subject to seasonal variations based on the timing of television, film, streaming and digital content releases.

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Our failure to accurately predict and respond to consumer demand, resulting in under producing popular items and/or overproducing less popular items, would reduce our total sales and harm our results of operations.

As a result of the seasonal nature of our business, we would be significantly and adversely affected, in a manner disproportionate to the impact on a company with sales spread more evenly throughout the year, by unforeseen events such as a natural disaster, a terrorist attack, economic shock or pandemic that harms the retail environment or consumer buying patterns during our key selling season, or by events such as strikes or port delays or other supply chain challenges that interfere with the shipment of goods, particularly from the Far East, during the critical months leading up to the holiday shopping season.

or consumer buying patterns during our key selling season, or by events such as strikes or port delays or other supply chain challenges that interfere with the shipment of goods, particularly from the Far East, during the critical months leading up to the holiday shopping season.

If we incurred any significant impairment charges, our net earnings would be reduced.

Declines in the profitability of acquired brands or our decision to reduce our focus or exit these brands may impact our ability to recover the carrying value of the related assets and could result in an impairment charge.

Declines in the profitability of acquired brands or businesses or our decision to reduce our focus or exit these brands or businesses, such as certain non-core entertainment assets of the business, may impact our ability to recover the carrying value of the related assets and could result in an impairment charge.

Similarly, declines in our profitability may impact the fair value of our reporting units, which could result in a write-down of our goodwill and consequently harm our net earnings.

In 2022, we had approximately $322.4 million of impairment charges in connection with the implementation of the Company's strategic review and adoption of the Blueprint 2.0 strategy.

These charges consisted of a goodwill impairment loss of $11.8 million and asset impairments of $10.3 million related to the exit of non-core businesses within the Entertainment segment, a charge of $281.0 million related to a partial impairment of the Company's definite-lived Power Rangers intangible asset due to changes in entertainment strategy and plans, incurred incremental asset charges related to product cancellations, consisting of inventory reserves and asset write offs of $14.9 million within the Consumer Products segment, and other strategy related asset impairments of certain discontinued projects of $4.4 million within the Entertainment segment.

We may incur impairments if the films and television programs we acquire and produce do not perform well enough to recoup our acquisition, production, marketing and distribution costs.

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Similarly, our business could be harmed by greater-than-expected costs, or unexpected delays or difficulties, associated with our investment in Discovery Family Channel, such as difficulties in increasing subscribers to the network or in building advertising revenues for Discovery Family Channel.

During the fourth quarter of 2021 we recorded an impairment loss of $74.1 million associated with our investment in the Discovery Family Channel.

For example, during the fourth quarter of 2021 we recorded an impairment loss of $74.1 million associated with our investment in the Discovery Family Channel.

Changes in foreign currency exchange rates can significantly impact our reported financial performance.

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dollars, may be meaningfully impacted even if our business in the local currency is not significantly affected.

In 2022, our sales were adversely impacted due to the strength of the U.S.

dollar compared to certain foreign currencies in territories in which we operate.

Similarly, our expenses can be significantly impacted, in U.S.

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Our indebtedness may limit our availability of cash, cause us to divert cash to fund debt service payments or make it more difficult to take certain other actions .

We incurred significant indebtedness to finance our acquisition of eOne.

The increase in our debt service obligations resulting from additional indebtedness could have a material adverse effect on our results of operations and financial condition.

We incurred significant indebtedness to finance our acquisition of eOne in 2019.

While we continue to pay down this indebtedness, the increase in our debt service obligations resulting from additional indebtedness could have a material adverse effect on our results of operations and financial condition.

In particular, our increased indebtedness could:

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We cannot guarantee that we would be able to refinance debt on favorable terms, or at all.

If we are unable to obtain production financing, on favorable terms or at all, we may be unable to produce certain films and television programs or if we do so, would have to produce them at higher cost and greater risk to us.

With the acquisition of eOne we expect to continue to use production financing to finance certain of our productions, which eOne has historically been able to obtain on commercially reasonable terms.

The use of third party financing also reduces the risk to us and reduces the demand on our cash and liquidity.

In the event that we are unable to provide eOne with appropriate financing or if third party production financing becomes unavailable on reasonable commercial terms or at all, we may not have sufficient alternative funding sources available to finance a particular production.

In this case, we may not be able to produce the films and television programs we plan to do, which could harm our business.

Changes in, or differing interpretations of, income tax laws and rules, and changes in our geographic operating results, may impact our effective tax rate.

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There is some degree of uncertainty and subjectivity in complying with transfer pricing rules.

Our effective tax rate could be impacted by changes in, or the interpretation of, tax laws, such as those being considered by the current U.S.

Our effective tax rate could be impacted by changes in, or the interpretation of, tax laws, such as those imposed by the current U.S.

administration and other jurisdictions in which we do business, or by changes in the amount of revenue and earnings we derive, or are determined to derive by tax authorities, from jurisdictions with differing tax rates.

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In addition, certain of our products are subject to regulation by the Food and Drug Administration or similar international authorities.

Advertising to children is subject

to regulation by the Federal Trade Commission, the Federal Communications Commission and a host of other agencies globally, and the collection of information from children under the age of 13 is subject to the provisions of the Children’s Online Privacy Protection Act and other privacy laws around the world.

Advertising to children is subject to regulation by the Federal Trade Commission, the Federal Communications Commission and a host of other agencies globally, and the collection of information from children under the age of 13 is subject to the provisions of the Children’s Online Privacy Protection Act and other privacy laws around the world.

The collection of personally identifiable information from anyone, including adults, is under increasing regulation in many markets, such as the General Data Protection Regulation adopted by the European Union, and data protection laws in the United States and in a number of other counties.

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We may also be subject to involuntary product recalls or may voluntarily conduct a product recall.

While costs associated with product recalls have generally not been material to our business, the costs associated with future product recalls individually or in the aggregate in any given fiscal year could be significant.

While costs associated with product recalls have generally not been material to our business, the costs associated with future product recalls

individually or in the aggregate in any given fiscal year could be significant.

In addition, any product recall, regardless of direct costs of the recall, may harm the reputation of our products and have a negative impact on our future revenues and results of operations.

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Complying with these regulations imposes costs on us which can reduce our profitability and our failure to successfully comply with any such legal requirements could subject us to monetary liabilities and other sanctions that could further harm our business and financial condition.

We may face increased costs in achieving our sustainability goals, and, any failure to achieve our goals could result in reputational damage.

We view sustainability challenges as opportunities to innovate and continuously improve our product design and operational efficiencies.

We also believe the long-term viability and health of our own operations and our supply chain, and the significant potential for environmental improvements, are critical to our business success.

We have set key goals and objectives in this area as described in our business section of this Form 10-K.

We devote significant resources and expenditures to help achieve these goals.

It is possible that we will incur significant expense in trying to achieve these goals with no assurance that we will be successful.

Additionally, our reputation could be damaged if we fail to achieve our sustainability goals, or if we or others in our industry do not act, or are perceived not to act, responsibly with respect to the production and packaging of our products.

Our entertainment business involves risks of liability claims for media content, which could adversely affect our business, results of operations and financial condition.

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Any imposition of liability that is not covered by insurance or is in excess of insurance coverage could have a material adverse effect on our business, results of operation and financial condition.

Failure to achieve our sustainability goals could result in reputational damage.

We view sustainability challenges as opportunities to innovate and continuously improve our product design and operational efficiencies.

We have set key goals and objectives in this area as described in our business section of this Form 10-K.

Our reputation could be damaged if we fail to achieve our sustainability goals, or if we or others in our industry do not act, or are perceived not to act, responsibly with respect to the production and packaging of our products.

We are involved in litigation, arbitration or regulatory matters where the outcome is uncertain and which could entail significant expense.

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Compared sentence by sentence after normalising whitespace, quotation marks, case and digits, so re-formatting and restated figures do not read as changed language. Wording changes appear as one removal and one addition. The current filing and the prior one are authoritative.

What changed 10-K

Item 1A. Risk Factors